American International Group has delivered a 61.4% total return over the past 5 years, which naturally puts the spotlight on whether the current US$82.32 share price is actually supported by the returns the insurer earns on its capital. With fresh news on expansion in Latin America and active capital returns to shareholders, the key issue now is how those moves feed into the underlying economics of AIG's business rather than just the share chart.
- A 61.4% gain over 5 years means long term holders have already seen a meaningful payoff, so any fresh buy case now leans heavily on the rate of return AIG can continue to earn on the capital it deploys.
- The push to acquire Everest operations in Colombia and Chile can reshape how efficiently AIG puts capital to work in commercial insurance across Latin America, which matters for both future return on equity and the timing of cash flows from those markets.
- What if you looked at American International Group through its earnings instead? See why American International Group's 13.0x P/E tells a different valuation story.
The stock's next move may depend on whether the returns AIG earns on its capital today are strong enough, and durable enough, to justify the price investors are being asked to pay.
If you want to test the same question about returns on capital across a wider field rather than just American International Group, scan through 30 resilient stocks with low risk scores.
Does American International Group Look Undervalued on Excess Returns?
The Excess Returns model looks at how effectively American International Group turns its equity base into earnings above its own capital cost. On this view, AIG is treated as a mature insurer with steady profitability rather than a high growth story.
The inputs are punchy. Book Value is $74.96 per share and Stable EPS is $8.73 per share, against a Cost of Equity of $6.10 per share and an Excess Return of $2.63 per share. That is underpinned by an Average Return on Equity of 10.35% and a Stable Book Value assumption of $84.33 per share based on analyst estimates. Taken together, the projections in this Excess Returns framework put American International Group's estimated intrinsic value substantially above the current US$82.32 share price. Because the recent expansion in Colombia and the agreed Chile acquisition direct more capital into commercial lines, the model implies the market is still assigning a cautious price to those returns. Find out what American International Group could be worth using our Excess Returns estimate.
The American International Group Narrative: What Would Justify Today's Price?
Narratives pick up where the valuation puzzle for American International Group leaves off. They spell out which paths for growth, profitability and earnings would need to play out for the shares to be worth materially more or less than today’s price, and they sit on Simply Wall St’s Community page. Rather than focusing on a single multiple or model line, each narrative lays out the assumptions behind its fair value so you can compare them with future results as they are reported.
One of the top narratives on American International Group: 7% undervalued
This Narrative is the analyst consensus Narrative on Simply Wall St, which compiles analysts' consensus price target and revenue and earnings forecasts, not one person's view.
"The main thing that has to go right is that AIG continues to convert its cycle management, underwriting discipline, and expense ratio program into sustainably strong combined ratios…"
Discover why this Narrative puts American International Group at 7% undervalued.
An unanswered piece of the American International Group puzzle
Valuation work only goes so far if you do not also understand who is steering American International Group and how their rewards line up with your interests. See who runs American International Group and how they are paid.
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